A class-action lawsuit against Hawthorn Bank alleges the bank has illegally charged customers for overdrafting their accounts.
Hawthorn, in response, says the charges are legal and are governed by a contract. It says any losses by the plaintiffs were caused by their own "misuse or abuse of their checking accounts."
The suit against the bank and its parent company was filed earlier this month by Bartimus, Frickleton, Robertson & Gorny on behalf of Laurie Freeman and other affected customers. Freeman's hometown isn't listed, but the suit was filed in Jackson County.
The suit says the charges stem from customers using their bank debit card for purchases or withdrawals that cause their accounts to have insufficient balances. Even a 1-cent overdraft results in a charge of $25 to the customer, it says.
In the "automated overdraft program," the bank automatically advances the amount needed to close the transaction "rather than notifying the customer that he or she has insufficient money to cover the transaction and declining the transaction," the suit says.
This happened to Freeman, the plaintiff, between January and July of 2010.
The company, headquartered in Jefferson City, has two dozen bank locations in central, western and southern Missouri.
One point of contention in the suit is whether the charges for overdrafting are fees or interest.
The lawsuit argues that since no service is offered in connection with the fee, the "fee" is actually interest that, for an overdraft of $1 that is paid the next day, amounts to 912,500 percent interest a year.
That "victimizes the Missouri citizens who most need the protections of Missouri's usury laws," according to the lawsuit.
Those laws require interest to be capped at 10 percent a year, the lawsuit says.
Hawthorn disagrees. In the bank's 11-page response to the suit, it says "allowing a customer to overdraw his or her account is not a loan and an overdraft fee is not interest."
The suit also cites a 2008 FCIC study showing that the vast majority of large banks automatically enrolled customers in the bank's automated overdraft programs, and the suit says such programs are "big business."
Freeman, the plaintiff, believes a minimum of tens of thousands of Hawthorn customers were affected, and that the number could reach into the millions.
The suit estimates that individual damages for customers likely range from tens to hundreds of dollars, but it says the plaintiff's attorneys will be compelled to invest millions of dollars in time, costs and expenses.
It seeks a jury trial and asks that the bank give affected customers twice the amount of the charges collected in connection to the overdraft program, as well as interest, attorney fees and other costs of the lawsuit.
In a letter sent by the plaintiff's attorneys to Hawthorn customers, it says affected customers don't need to do anything to remain a party to the class action, but must opt out in a written letter to the plaintiff's law firm if they don't want to be included.
Neither James Frickleton, an attorney for the plaintiff, nor John Aisenbrey, an attorney for the defendant, could be reached on Wednesday for comment.